Introduction to this report:
The company's 1Q24 performance exceeded expectations, and equity installations are expected to continue to grow under the combined efforts of the participating holding business.
Key points of investment:
Maintaining the “increase in holdings” rating: Taking into account factors such as the company's incoming water from the Yalong River and rising electricity prices, the net profit from 2024 to 2025 was raised to 56.8/5.91 billion yuan (original value: 50.3/5.22 billion yuan). The net profit to the mother is estimated to be 6.20 billion yuan in 2026, corresponding to EPS of 1.16/1.21/1.27 yuan in 2024 to 2026. Referring to industry comparable company valuations, PE was given 18 times in 2024, the target price was raised to 20.88 yuan, and the “gain” rating was maintained.
1Q24 results exceeded expectations. The company's net profit to mother in 2023 was 4.40 billion yuan, +25.2% year-on-year; the company's 1Q24 net profit to mother was 1.27 billion yuan, +12.1% year-on-year, exceeding our previous expectations.
The company plans to pay a dividend of 0.4 yuan per share in 2023, with a dividend ratio of 44.3%.
Investment returns and cost savings drive performance growth. The company's 1Q24 performance growth mainly benefited from: 1) the company's net income from 1Q24 investment of 1.32 billion yuan, +7.0% year-on-year. We estimate that the increase in investment income of 1Q23 was mainly due to the increase in the performance of participating hydropower companies; 2) the financial expenses corresponding to the “Sichuan Investment Bonds” share conversion and redemption decreased year-on-year, and the company's 1Q24 financial expenses were 100 million yuan, -32.0% year-on-year. According to Shuo Dianhui's official account, the electricity price for centralized trading in Sichuan Province in 2024 was 0.265/0.143/0.270/0.385 yuan/kilowatt-hour during the annual equilibrium, abundant water period/flat water period/dry water period, -0.4%/+6.2%/-2.2%/-2.2% compared to the same period.
Participating holdings are making concerted efforts, and equity installations are expected to continue to grow. 1) By the end of 2023, the Yalong River Basin had put into operation more than 20.8 GW of installed water and scenery, and the total installed capacity of the clean energy base was planned to be 100 GW); 2) In 2023, the company added 0.1 GW of new energy holding equipment. In addition, the company selected the Pingshan Pumping Power Station (1.2 GW initially installed) as a market-based competitive investment and development entity.
Risk warning: Demand for electricity falls short of expectations, incoming water falls short of expectations, electricity prices are lower than expected, etc.